Board of Directors Vs Advisory Board
A board of directors is a set of individuals who are responsible for the oversight, control and governance of an organization. They are www.theirboard.com/an-in-depth-explanation-of-data-room-providers/ accountable for the legal obligations and accountability of a business. This means that if they fail to comply with their fiduciary obligations and are found to be in breach, they could be personally liable.
An advisory board however is a group of people who provide mentorship and advice on how a company should be run. The advice they offer is more direct and their focus tends to be on development, growth and strategy, rather than reporting and governance, reducing risk and avoiding downside risk.
Ideally, an organization should clearly define the purpose of its advisory board in all official documentation such as meeting minutes and communications via verbal to avoid confusion. This will ensure that they do not accidentally cross-check into the jurisdiction of a board of directors, which could have serious legal implications in the event they fail to perform their fiduciary responsibilities.
In reality, this distinction can be blurred, and companies may refer to their advisory board as “the Board.” It is worthwhile putting it in writing to avoid confusion and accidental mistakes. A formal written statement defining the role of an advisory board can help to minimise the risk of confusion for those involved and is particularly useful for those whose members of the advisory panel may have been previously part of the board of directors or have just joined an organization for the first time.